New Tesla chairwoman’s biggest challenge is controlling Musk
DETROIT >> Australian telecommunications executive Robyn Denholm brings much-needed financial and auto industry expertise to her new role as Tesla’s board chairwoman, but her biggest challenge is whether she can rein in a CEO with a proclivity for misbehavior.
Denholm, who has been a Tesla board member for nearly five years, was named to the post late Wednesday, replacing Elon Musk as part of a securities fraud settlement with U.S. government regulators.
Corporate governance experts say they would have preferred an outsider with manufacturing expertise be appointed to lead the board, now dominated by people with personal and financial ties to Musk, including his brother.
They aren’t sure if Denholm was hired just to placate the Securities and Exchange Commission to comply with the settlement or whether she’ll actually be able to corral the visionary but erratic Musk, who remains CEO.
“With all the crazy stuff going on, she was there,” said Rohan Williamson, a finance professor who studies corporate governance at Georgetown University’s McDonough School of Business. “She couldn’t control him before. Is anything going to change?”
Denholm, 55, is chief financial officer and strategy head at Telstra Corp. Ltd., Australia’s largest telecommunications company. Her new role at Tesla came largely because of the board’s failure to control Musk, especially when he made a surprise announcement over Twitter in August that funding was secured to take Tesla private at $420 per share.
That drove up Tesla’s stock price and hurt short-sellers, investors who bet against the company’s success. Eventually it drew a lawsuit from the SEC alleging that Musk misled investors.
Denholm will step down from Telstra after a sixmonth notice period. Then she’ll work full-time at Tesla, where she has served on the board since 2014. Under the SEC settlement, Musk can’t return as chairman for three years, and only with a shareholder vote.
The move vaults Denholm from relative obscurity into a high-profile position of trying to muzzle Musk and manage a company that is struggling to produce vehicles and make money.
Charles Elson, director of the corporate governance center at the University of Delaware, said Tesla should have brought in someone from outside. No matter how talented Denholm may be, and even though she appears to have fewer ties to Musk than other directors, she has a shadow over her of being on the board that did little as Musk misbehaved. “You really have got to wonder,” he said. “No other CEO of any other public company would have survived this.”
Making Denholm a fulltime chair also creates governance problems because she could become a Tesla executive, blurring her role as an independent check on management, Elson said.
Email messages sent to Denholm Thursday were not immediately returned and Tesla declined comment beyond its statement announcing Denholm as chair.
Denholm brings financial experience and other positives to the table for Tesla, said Michael Cusumano, a professor at the Massachusetts Institute of Technology’s Sloan School of Management.
Before Telstra, she worked in Silicon Valley as chief financial officer at Juniper Networks and head of corporate strategic planning at Sun Microsystems. She also was national finance manager at Toyota Motor Corp.’s operations in Australia, and she’s a member of the board at Swiss robotics and industrial machinery maker ABB.
“She could bring some more financial discipline to Tesla,” which has $10 billion in debt and must keep manufacturing a large number of lower-priced Model 3 sedans to service its large debt and pay the bills, Cusumano said. Tesla cars also are having reliability problems, he said.
Cusumano further notes that Denholm’s track record as a Tesla board member is not necessarily an indication of how she’ll be as a chairwoman.